Wilbur Ross, quintessential distressed asset investor, has poured more than 40% of his portfolio into two assets: EXCO Resources (XCO) and Bank of Ireland (IRE). Both, like many of his other investments, are investments in recoveries: one in natural gas prices and one in the economy of Ireland. So far, on paper he has lost a considerable amount on EXCO and still has a thin profit on Bank of Ireland.

For over a decade beginning in the mid-70s, Wilbur Ross was the top bankruptcy adviser, leading the worldwide bankruptcy advisory practice at Rothschild Inc. In 2000, Ross founded his own firm, WL Ross & Co., with $440 million. He now has a net worth of $2.2 billion and manages more than $10 billion, having made his initial fortune steel, coal, textiles and car parts. He looks for near-dead assets to turn them around, not liquidate them.

Though Ross has a history of success in the most dire turnaround situations, his history with EXCO Resources (XCO) has been less glorious. But he has been buying the stock from the third quarter 2010 to the present and it is his highest conviction pick. He purchased the bulk of his shares at their highest price in the last several years (approximately $17.50 - $20) and increased his holdings three times in the first quarter of 2012, according to GuruFocus Real Time Picks. He now owns 29,504,077 shares or 13.62% of the company.

Shares of Exco trade on Tuesday trade for $6.37, meaning Ross has lost 63% on his Exco investment on average, or almost $300 million.

The company Ross believes in so much is an independent oil and gas company focusing on onshore U.S. oil and natural gas properties and shale resource plays. The company’s primary source of distress is natural gas. Natural gas spot prices have dropped from more than $5 in mid-2010 to around $2 in March. In the week ending Wednesday, March 28, 2012, prices were down 17 cents reflecting record-warm March temperatures for most of the week, according to the U.S. Energy Information Administration (EIA).

On March 7, two days after EXCO announced that Ross would join the board, he said on Fox Business, “I think it’s inevitable [that natural gas is the wave of the future]. It’s cheaper per BTU than any other form of energy and it’s much less pollutive than any other fossil fuel.”

Natural gas is one of the cleanest, safest and most useful energy resources, and is shapeless, colorless and odorless in its pure form. It is also cleaner burning than other fossil fuels and is abundant in the U.S. With rising gas prices, higher production and potential tax credits, more natural gas-powered vehicles could enter the market soon.

“You notice there were some announcements by the Big 3 a few days ago that they’re starting to [manufacture natural gas vehicles]. It will really start with trucks first, just as it earlier started with buses and garbage trucks and things. So it will come,” Ross said on Fox.

EXCO, one of Ross’ major investments in natural gas, is a troubled company that set production records last year but still made a thin profit due to low gas prices. EXCO’s annual revenue had been declining since 2008, but increased from $515 million in 2010 to $754 million in 2011 due largely to a 58% increase in oil and natural gas production in the fourth quarter. The production increase was helped by the success of its Haynesville shale drilling program, which accounted 73% of its total production during the fourth quarter 2011 compared to 59% in fourth quarter 2010, and 71% for the full year compared to 49% for 2010.

The company reported a net loss of $0.78 per share in the fourth quarter and net income of $0.10 per share for the full year, however, compared to a net loss of $0.34 in the fourth quarter 2010 and net income of $3.16 per share for the full year 2010.

“In spite of the current negative bias toward natural gas, we have significant reserves, acreage and infrastructure assets in the two most prolific and low cost natural gas plays in the country, and we will continue to prudently develop our assets,” Douglas H. Miller, EXCO’s chief executive officer said in a statement.

The company is well positioned to benefit from natural gas prices if and when they do rise again. It has roughly $640 million in cash on its balance sheet, along with almost $2 billion in long-term liabilities and debt, and is looking to cut costs until then.

Ross also stepped in during the most powerful banking crisis in history to help rescue the Bank of Ireland from government control. He, Prem Watsa, and several other investors invested 1.12 billion euros into the institution in mid-2011. Ross bought 2,933,319,858 shares in 2011 at a cost of 10 euro cents per share. It is now his largest holding, representing 22.7% of his portfolio.

In the first five months after buying his stake, he made a 105 million-euro ($138 million) gain, according to Bloomberg. The stock, which he purchased at 10 cents, trades for 12 cents on Tuesday after reaching as high as 15 cents in 2012.

Ross discussed his Ireland investment on March 6. He has no doubt about the Irish recovery as it was the only country ahead of schedule to fulfill its promises after its bailout and real estate incentives. Like most of his investments, he knows the minutiae of the fundamentals and found a situation that had been historically solid but had a temporary lapse:

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